At the time of the American Civil War, President Abraham Lincoln needed a means of financing the conflict and discovered that foreign banks offered to lend the United States money only at a highly usurious 24% to 36% interest rate. Rather than accepting such onerous terms, Lincoln consulted with his friend from Chicago Colonel Edmund Dick Taylor who suggested that the U.S Treasury should print and issue its own (interest free) currency to pay for war debts. According to Taylor,
"The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power."The United States Note issued by the U.S. Treasury was popularly called the "greenback" due to the green ink used to print the back of the notes, which was used to distinguish them from other notes in circulation. The greenback turned out to be a success largely because they were specified by law as legal tender, so that creditors were compelled to accept them even though they were not backed by gold, bank deposits, or government reserves, and bore no interest. One of the key features of the greenback is that it did not rely on debt (e.g. bonds) being issued first for the money to exist. The benefit of this is that taxpayers did not need to pay any interest to service the debt attached to the greenback, because there was none. The one big flaw is that the greenback was eventually exchanged at a discount (e.g. unfavorable rate) to gold due to currency debasement. Originally in 1862 there were only plans to create $150,000,000 worth of greenbacks with the passage of the First Legal Tender Act. In 1863 Congress passed the Second Legal Tender Act and Third Legal Tender Act which grew the greenback supply to $450,000,000. This would have been fine if they, for example, had retired some of the other money in circulation with greenbacks.
Abraham Lincoln, unlike Andrew Jackson, was a central banking advocate who liked the idea of a federally controlled fiat currency. Andrew Jackson was against central banks and federal control of the money supply in addition to being a "sound money" advocate.
Although Lincoln's greenback was an overall success (except for the debasement aspect), most in Congress wanted to retire the greenback and move towards a gold standard. Advocates of permanently remaking America's monetary system according to the greenback paradigm were in the minority and did not win out in the end. The banksters actually got the last laugh with the passage of the National Banking Act (in two parts), which Lincoln should have vetoed. The National Banking Act did have some good characteristics, but it essentially set the framework for the debt based currency system we use today. Interest bearing bonds are required to be issued before any currency can exist. Bonds are aptly named because ever since the passage of the National Banking Act we have been kept in debt bondage.
How do bonds keep us in bondage? I have extracted a short video segment from Bill Still's master work The Money Masters where Mr. Still explains the Federal Reserve's four step money creation process. Still also explains why our bond (debt) based currency is a scam that benefits the banksters at our expense.
Following is Bill Still's latest advice via his YouTube channel on how to overcome the recent U.S. national debt crisis and whether or not he thinks we should increase the debt ceiling. You might be surprised at how straightforwards the solution is.
7/24/2011 SR 19 - U.S. Debt Limit
6/22/2011 Still Report #18: Iceland Ireland
Bill Still's latest book is titled "No More National Debt" and can be found at http://billstill.com amazon.com or the infowars.com store.